A Theory of Speculation in Community Assets

65 Pages Posted: 25 May 2022 Last revised: 21 Jun 2023

See all articles by Kevin Mei

Kevin Mei

University of Texas at Austin - McCombs School of Business

Michael Sockin

University of Texas at Austin - McCombs School of Business

Date Written: April 20, 2022

Abstract

We model a community platform where users learn about the quality of its services over time by using its native tokens. The key friction is users can buy tokens for services or trade them primarily for speculation. In the presence of network effects, this tension can lead to situations where no user adopts the platform’s services because the risk-adjusted benefit of adoption is lower than that from speculation. Our model can be applied to any asset that derives value from network effects and suggests high token inflation and incentive schemes favoring service usage may be integral to sustaining community participation.

Keywords: Community, Digital Asset, Social Learning, Speculation, Mean-Field Game, Network Effects

Suggested Citation

Mei, Kevin and Sockin, Michael, A Theory of Speculation in Community Assets (April 20, 2022). Available at SSRN: https://ssrn.com/abstract=4115073 or http://dx.doi.org/10.2139/ssrn.4115073

Kevin Mei

University of Texas at Austin - McCombs School of Business ( email )

Michael Sockin (Contact Author)

University of Texas at Austin - McCombs School of Business ( email )

Austin, TX 78712
United States

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